Alternative Lending – Here’s What You Need to Know


Securing a bank loan has become more difficult than ever before. Especially small or mid-sized startups face the most difficulty in getting a bank loan approved. The reason behind this strict loan approval process might be that banks require strong finances and positive cash flow. In addition to this, the bank requires collateral and many other financial standings before approving loans.

So, what will the small and mid-sized companies do now? How can they get extra finances to boost their startups?

The answer is simply Alternative Lending! It has become a trending and practical substitute for bank loans for every sort of business. Well, if you are wondering how exactly it works and its benefits, then keep on reading below:

What is Alternative Lending?

It is a new loan securing scheme that is out of the bounds of a traditional banking process and rules. Whether it is debt financing or direct lending, you can simply get it with this advanced lending process.

What makes alternative lending different from bank loans include many factors like:

  • The comparatively easier loan process
  • Ease of online documentation
  • Steady approval
  • Flexible repayment schedules
  • Reasonable interest rates

Types of Alternative Lending:

There are various financial products in different lending companies. Following are some of the common or most opted lending services:

Direct Lending: Direct lending involves business development companies that provide finances to startups or small-scale ventures. The investors provide loans or debts to small to mid-sized companies at various levels.

Venture Debt: For those who are short on the capital required to start their project or business plan, can go for venture debt. It is a substitute for venture capital and can be accessed from investors and business development companies.

Non-dilutive Financing: It involves securing a loan or debt without risking your ownership share. Non-diluting funding is not completely free as there are certain requirements to be fulfilled. However, it involves funding projects for the sake of the growth of the economy and businesses. This type of funding is backed by government bodies usually.

Debt Financing: Debt financing involves securing a loan against non-cash forms e.g., property, the value of equipment, performance of a company, etc.

Things to Know Before Choosing an Alternative Lending Company

If you are new to the concept of lending, it is important that you must acquire basic knowledge of lending companies and how they work. If you are having trouble choosing the right company for your business financing, consider the following factors to make an informed decision.

Lending options: You can go with a company that offers a variety of financial products that match your business needs.

Speed of approval: While deciding, you can compare the duration of approval of the companies. Avoid lengthy process of documentation and go with a company with a simple and quick process of loan approval and disbursement. Not only the speed but also the rate of approval also matters.

Fees and interest rates: Get knowledge of the fees and interest rates of different companies and compare them. Select a company whose interest rates matches your financial profile.

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